Ecombd

Friday, May 23, 2008

World’s top NAND flash memory producer Toshiba Corporation (TYO:6502) posted an 80% decline in its operating profit in the first quarter of 2008 due to fall in its NAND chips prices. The company expects that prices of NAND chips used in Apple iPod will remain flat throughout the second quarter of the year but it could pick up in the third quarter. The company expects that demand of NAND chips will increase among laptop PC makers as they are using NAND memory instead of hard disk drives, and sophisticated mobile phone producers.

On 22nd May, at the Reuters Global Technology, Media and Telecoms Summit, Shozo Saito, Toshiba corporate senior vice president, said that demand for Toshiba’s high-capacity flash memory chips has been strong. The company has been receiving orders 5% more than it could supply and it would increase upto 10% in the third quarter. He said that his company is prepared for a 50% slump in business because the past data shows 50% average decline per year. In the face of further price falls, the company will curb plans to increase output. Saito said that his company will keep profit margins by cutting costs. Reuters reports:

He said it was possible that the company would initially start production at only one of two NAND factories it is planning to build in 2010.

Toshiba and partner SanDisk Corp (SNDK.O: Quote, Profile, Research) together plan to spend a total 1.7 trillion yen ($16.5 billion) on two new plants in Japan, but SanDisk has so far only committed to investing in one of them.

"It depends on the market situation. If NAND prices fall too much, we will leave factory buildings empty," he said.

"We could start production at one plant first, and if so, we think that would be the one in Yokkaichi," in western Japan, he said.

For a long time, Toshiba Corporation has been trying to avoid sharp price fluctuations by shifting more towards “embedded” NAND memory used in portable music players and other digital devices. Saito said that his company will increase the percentage of the embedded NAND production upto 70% of its total production in one year.